Fidelity fixed income duo: Investor 'euphoria' over financials will be tested

Room for sector outperformance

Fidelity fixed income managers Ian Spreadbury and Sajiv Vaid have begun increasing the allocation to financials on the £3.8bn Moneybuilder Income fund, but warned the recovery might be short-lived.

The managers, who co-run the Fidelity Moneybuilder Income fund, have been increasing the fund's weighting to financials but said they remained cautious on the sector.  Financials struggled last year, with the sector returning 8% versus a 14% return from non-financials, but began to recover in Q4 2016 and Q1 2017. The managers said: "There has been a turnaround in the sector and improved sentiment due to the increase in interest rates and there is more room for outperformance relative to non-financials. "We have increased our exposure, but we are trying to keep it at around 20%-22%....